Centre Proposes Next Gen GST With Two-Slab System

The Indian government is preparing for a significant tax reform with the proposal of a “Next Gen GST.” Senior officials have announced that the new Goods and Services Tax structure will consist of just two slabs: 5% and 18%. This will replace the current four-tier system of 5%, 12%, 18%, and 28%.

This reform aims to simplify the taxation process and enhance efficiency while easing the financial burden on households. Everyday essentials such as butter, juices, and dry fruits, currently taxed at 12%, will move into the lower 5% slab. In contrast, items like TVs, refrigerators, washing machines, and cement, presently taxed at 28%, will be adjusted to the standard 18% slab.

This restructuring is expected to decrease the prices of commonly used items, allowing consumers to retain more money. As spending increases, it will stimulate overall consumption and drive economic growth. The government emphasizes that this reform considers the needs of middle-class families, farmers, and small businesses.

The initiative comes amid global tariff challenges, including new U.S. import duties on Indian goods. Officials state that the GST overhaul aims to safeguard India’s trade competitiveness while providing long-term stability to tax structures.

Once approved by the GST Council, which is headed by the Union Finance Minister and includes representatives from all states, the new two-slab GST could signify the beginning of a gradual transition toward a single tax rate. Experts suggest that such a uniform rate is more achievable for developed economies where income and spending capacities are more consistent.

The Centre believes this reform is a “game changer” for India’s economic development. While there may be a short-term loss in revenue, the government anticipates that increased consumption will offset this decline. By 2047, when India envisions itself as a developed nation, the implementation of a single-rate GST may become a reality.